All right, good morning. I'm Manan Gosalia, the mid-cap banks analyst at Morgan Stanley. On behalf of the entire Morgan Stanley Financials team, I'd like to welcome everyone here to the 14th annual Morgan Stanley Financials Conference. We've got a great lineup over the next 3 days with 145 companies in attendance. A quick disclosure before we kick off. For important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is not allowed, and if you have any questions, please reach out to your Morgan Stanley sales representative. Kicking off the conference, I'm delighted to have with us today Huntington's Chief Financial Officer, Zach Wasserman. Zach will kick off with a few prepared remarks, and then we'll go into Q&A.
Zach, over to you.
Thank you. Good morning. Thank you, Manan, and Morgan Stanley for hosting us today. I want to welcome everyone. We appreciate your interest in Huntington. Before we get started, please review slide two, which applies to the forward-looking statements we'll make today. Let me begin today with a few comments related to our strategy and recent initiatives. Then I'll turn it back over to Manan for Q&A. Let's start on slide three. At Huntington, we live our purpose every day. We have a clear vision to become the country's leading people first, digitally powered bank. On slide four, there are four key messages I'd like to share with you today. First, the cumulative effect of the actions we've taken over the last decade places Huntington in a position of strength as we navigate this environment. As we saw in our first quarter results, our deposit franchise is top tier.
Second, our approach is guided by our aggregate, moderate to low risk appetite through the cycle. Third, we remain nimble as we dynamically manage through this environment. Fourth, Huntington's management team is a group of disciplined operators with a track record of execution. This focus on delivering results permeates the organization and drives execution of our strategy and continued top quartile performance. Turning to slide 5, we operate in this period from a position of strength. Our core strategy is centered on acquiring and deepening primary bank relationships. We have an incredibly strong track record of customer service and product innovation. The success of these efforts is reflected in being recognized by J.D. Power for number 1 in customer satisfaction, 7 out of the past 11 years, and for being awarded the number 1 mobile app ranking by J.D.
Power, again, for the 5th consecutive year. Our liquidity continues to be robust. Our two primary sources of liquidity, cash and borrowing capacity at the FHLB and Federal Reserve, represented roughly $86 billion as of May 31st. This pool of available liquidity represented 191% of uninsured deposits of peer leading coverage. Our capital remains solid. We expect to continue to build CET1 to the high end of our 9%-10% operating range through year-end. Our credit reserves are top tier in the peer group at 1.9%, and net charge-offs for the last 12 months were 13 basis points, compared to the peer median of 22 basis points. Our strength in deposits, liquidity, capital, and credit are the result of disciplined execution. Importantly, this strength supports our ability to capture opportunities as they arise in the current environment.
Our announcement this past Friday of our fund finance team lift out is a great example of that. Moving on to slide 6. Over the last 5 quarters, we've consistently delivered deposit growth, despite the backdrop of rising rates and quantitative tightening. Through the 1st quarter of the year, cumulative deposit growth was 2.7%, over 7 percentage points better than the peer median. During March, we saw stability of deposit balances, with growth through mid-April, as we shared on our earnings call. We have seen that deposit growth continue through the end of May, as total deposits have increased $2.8 billion compared to March 31st. On slide 7, we're expanding capital and our CET1 ratio over the course of the year, while maintaining our top priority to fund high return loan growth.
We intend to drive CET1 to the top end of our 9%-10% range by the end of the year. Adjusting for AOCI, our adjusted CET1 was 7.9% at the end of the first quarter and places Huntington in the top quartile of the peer group. Turning to slide 8, we have mentioned how we are optimizing loan growth to generate the highest return on capital. As we balance the desire to grow loans and build the revenue base, along with our outlook to expand capital over the course of the year, we're remaining disciplined to ensure we generate solid NIM and return on capital from incremental loans. We have incrementally tuned our loan production to a rate which can support ongoing revenue growth while also supporting growing capital levels. We continue to be dynamic to manage that balance. Turning to slide 9.
Our loan portfolio is highly diversified and provides for consistency of performance through the cycle. As mentioned previously, our ACL is strong at 1.9%. Turning to slide 10, I want to highlight the focus areas for our financial management in 2023. In deposits, our strategy of acquiring and deepening primary bank relationships is working to drive sustained deposit growth. We expect to see deposit growth in Q2 on an ending basis, and we forecast deposit growth for the entire year within our prior range. We're driving capital to the high end of our 9%-10% operating range over the course of the year, as I've mentioned. One of the key levers to do that is our optimization of loan growth and calibrating production levels.
Our outlook for full year loan growth is unchanged at the low end of our 5%-7% prior guidance, while we will slow that growth in the back half of the year. On funding, the interest rate environment is playing out along the higher for longer scenario, and we now expect deposit beta to be a couple percentage points higher than what we shared in April, now approaching 40%. Given our modulation of loan production and the increased likelihood of higher for longer interest rate environment, as well as higher funding costs, our current forecast would indicate spread revenue growth just below our prior guidance of 6%-9%. On hedging, we've been active this quarter and entered into economic hedges to protect capital from tail risk in substantive operate scenarios.
There's an upfront premium associated with these hedges and the result in a mark to market each quarter. Currently, we're in a modest gain position that would flow through fee revenue. As a result of optimized loan growth and recent trends of lower capital markets activity impacted at an industry level from the uncertainties around the national debt ceiling last month, we do see some level of pressure on fee income in the near term. However, there's a lot of the year left to play out, and we expect to see sequential growth over the remainder of this year. On expenses, we remain committed to driving a very low level of underlying expense growth while maintaining critical long-term investments. We'll be dynamic in expense management, contingent on the revenue outlook. Net charge-offs continue to perform exceptionally well, and we're on track for our full year outlook.
Lastly, on preferred dividends, I want to highlight that we had a new issuance last quarter and an existing tranche moving from fixed to floating rate, which will result in our quarterly run rate stepping up slightly into Q2. With those opening remarks, let me turn it over to Manan now for the Q&A session.
Perfect. Thanks so much, Zach. Maybe to drill down into some of your comments on deposits, given, you know, that's where a lot of the investor interest is. You know, you mentioned that deposits are doing well. I think quarter to date, your deposits are up 2%. I think you spoke about how 1%-3% for the full year is still the right range. Is that correct?
That is correct. you know, I think on deposits, as I mentioned in my prepared remarks, you know, we're fundamentally focused on our strategy of acquiring and deepening primary bank relationships, and it's working. you know, in the first quarter, I mentioned at our earnings call in April that we saw 2% growth in consumer households, 4% growth year-over-year in business banking households, and we're also continuing to gather and win new names on our commercial business. That's the fundamental underpinning. Then on top of that, we've been actively working to deepen those relationships through a number of other products and channels post-acquisition. That's working. It's contributing to the growth we saw throughout April and into May.
For the full year, the guidance we'd given before, which we still think is appropriate, is growth between 1%-3%, excuse me, for 2023, which will largely be consumer led, at this point, and continue to feel a solid line of sight to that.
Perfect. I do want to dig into the consumer versus commercial angle. Before that, you know, maybe just talking about the mix of deposits between non-interest bearing and interest bearing. You know, I think you ended 1Q at about 25%, which is already, you know, close to the low on the price cycle. The questions we get on how low can that go if that stays higher for longer?
Yep.
Would you be able to share some thoughts on that?
Sure. Yeah, that's a great question. You know, in the past cycle, between 2017 and 2019, we saw non-interest bearing deposits move from around 30% at the beginning of cycle to 25% at the end of the cycle. It's down about 5 percentage points in terms of a mix shift last time. This time, we've seen slightly less change than that thus far, from 29% at the beginning of this cycle to 25%, so about a 4% delta. We do expect that overall, the mix shifts and the funding base will trend in not a significantly dissimilar level to what we've seen in past cycles, but likely, to your point, a couple more percentage points to go here throughout the course of the cycle if the current forecasts, you know, play out.
It might be somewhat higher, but not really substantively different. I don't see any scenario where we would go back to the level that Huntington was for pre-Great Financial Crisis. The company has changed quite a bit, and we've clearly benefited now from more than a decade of Fair Play strategy and gathering the kind of fundamental and diversified deposit base we have now. A couple points, probably more to go in that mix shift as we go throughout the next couple quarters.
Maybe if you can expand on that a little bit, because, you know, a lot of, you know, some of the generalist investors I talk to look back to pre-GFC and look at the non-interest bearing, deposit mix then. You know, can you talk about what the puts and takes are between where you were pre-GFC to where you are now?
Well, you know, I think the what has happened over that period is really a fundamental change in the nature of Huntington. Huntington pre-GFC was a $50 billion bank that was much, you know, smaller, less sophisticated, less of a differentiated strategy. Now the company is, you know, almost 4 times larger. It's obviously, it's significantly scaled and more developed franchise. That's really the fundamental thing that has changed. You know, we've now got, you know, a deposit base with millions of customers, very significant consumer, you know, a leading business banking franchise, clearly a strong commercial business as well. It's just, you know, a totally different company really at this point.
Got it. You know, maybe to come back to the comment you made earlier on consumer versus commercial. You know, historically, you have had a larger skew towards consumer deposits, a lot more than other regional banks. I think consumer makes up about two thirds of balances. You know, how big of an advantage is that in this type of an environment in terms of stickiness of those deposits?
Yeah. You know, we believe very firmly that the deposit base is the foundation of value of the company, and you can really see it at times like this. The strength of that incredibly granular, diversified, you know, highly insured deposit base that was built as a function of our Fair Play strategy and, you know, executing on that over the last decade has, you know, puts us in a position now where, to your point, you know, one of the things that came out of the events of March and April were, you know, a shift in the market in terms of commercial deposit gathering became much more expensive, more challenging.
The fact that we've got such a premier consumer and business banking deposit franchise gives us the opportunity now to lean into that and to shift the sources from which we expect to drive deposit growth, but ultimately, have a forecast which is virtually unchanged in terms of overall amount of deposit gathering. What we're seeing is, you know, the opportunity to really gather deposits at the margin here that are efficient, and that are, as I mentioned before, very much in keeping with that strategy in terms of granular, diversified.
How much of that is coming from the core business versus also your strategy to gain share, in new TCF markets like Chicago, the Twin Cities, Denver, that you've spoken about before?
You know, in terms of the composition of deposit growth, it's highly diversified across the whole footprint. Clearly, the established markets that we've had, you know, pre TCF acquisition contribute very significantly to that growth. With that being said, the TCF markets are doing terrific. You know, it's not surprising to us. We have been talking with all of you over time about how powerful the opportunities for revenue synergies were coming out of the TCF acquisition, and a large chunk of them, around a third of that synergy opportunity was in consumer. It was about penetrating into those acquired geographies, think Southeast Michigan, Denver, Chicago, with the Huntington brand and product set.
We've been increasing marketing and leveraging our really sophisticated marketing technology capabilities to target and acquire customers in those areas. It's about raising branch productivity. You know, the TCF branches were in phenomenal locations, great branch presence, and they were a solid, you know, sort of average level of production. Huntington was at a whole other level. Bringing the Huntington product set, the service ethos, the capabilities to that branch network likewise are resulting in really significant increases in productivity. You know, ultimately it all comes back to the results we've been seeing, which you can see, you know, is right on there on the page. It's really been working.
Are there any other levers to grow deposits from the consumer side? You know, I think, previously you've mentioned increasing marketing spend. You know, I feel like a lot of other peers are pulling back on marketing spend right now, given the focus on expenses. Can you talk about how that's translating into household growth right now?
Sure. You know, one of the key things that we're focused on at this point, given, you know, the uncertainty in the market, the turbulence in the banking industry, is just staying focused on our strategy and knowing that it's the right strategy to continue to win, and the performance will come through over time. So that commitment to drive marketing growth is an indication around that. We're not going to stop executing our growth plan, and it's really bearing fruit. In the first quarter, we increased marketing more than 13.5% year-on-year. The average in the median in the peer group was down 6.5%, so a huge delta in marketing acquisition.
You know, that's certainly a contributing factor to why we're continuing to acquire accounts, consumer business banking, as I mentioned, and be successful in gathering the deposits that come along with that.
All right. Perfect. Maybe to dig down a little bit into some of the guidance you gave for the quarter earlier on. You know, maybe to start with on net interest income and deposit betas. You know, I think you mentioned deposit betas closer to 40%, net interest income, a little bit lower than your prior range of 6%-9%. Can you talk about a little more about what's driving that and what the environment is like right now?
Sure. You know, on deposit beta, maybe just touch on that for a second. Clearly, yeah, I think we've mentioned in Q1 that we always plan with a variety of interest rate scenarios to understand what our strategies would be and what the implications would be. It appears more and more that the actual environment is playing out along the top end of our scenario outlook in a higher for longer scenario. As we've said, likely that will result in a longer beta cycle if rates are higher for longer, and potentially if the peak is higher, you know, a somewhat higher level. You know, that's sort of what's underlying the latest forecast we've got.
I will tell you know, anytime I talk about beta, I always try to stress that it's important to have a long-term forecast. You know, we want to make sure we're monitoring and tracking to that forecast. Clearly, there's a range of uncertainty, and it'll be, you know, ultimately how it plays out will be a function of how exactly the interest rate environment plays out. With that being said, you know, we think that even as interest costs are somewhat higher, so are asset yields. We're being very conscious in driving for incremental loan production that will drive really solid incremental NIMS and incremental returns. We do think it's a, you know, it's an accretive scenario over long term to asset yield as well.
Clearly, given the slightly tuned loan growth that we have in the back half of the year and the slightly higher funding costs, we'll see spread revenues just a little bit lower than the prior guidance range that we had provided before.
You know, maybe to drill down into those beta comments a little bit. In the event that, you know, we get the Fed stays higher for longer, you know, say we've reached a peak now, or we get one more hike and we reach a peak then, you know, how do you think about the trajectory of your, of deposit betas? Do deposit costs keep rising through the year?
You know, we'll see, Manan, I think is the answer. You know, at this point, we're planning that the most likely scenario is that there's 1 more hike and then a sort of a pause out through the end of the year into probably likely the early part of next year, if not even the middle part of next year. In that scenario, I think you'll see deposit costs rising throughout the course of the year. I think the velocity of them will be slowing, right? I think that you'll see a sort of a an asymptotic function over the next several quarters here.
Ultimately, again, how it plays out over the really longer term will be a function of, you know, what's going on, you know, in early 2024 and beyond. Again, likewise, there'll be a commensurate movement in asset yields as well that we'll make sure we manage carefully.
On the point on asset yields and loan spreads, what's keeping loan spreads elevated? Is it the lack of competition? Is it more banks recognizing the fact that cost of funds is going up?
Yeah, look, there's a lot of factors I think that are playing into right now what's going on in loan demand and loan pricing. certainly, an element is a very conscious focus from what we can perceive, certainly from us, but I think in the peer group and in banking more broadly, to really be careful in how capital is being allocated, so that, capital can both grow organically and support the highest return loan growth. I think there's a fairly disciplined environment underway at this point. you know, clearly, you know, we are also being very judicious about where we're driving that growth. Not only to get the best returns, but also to make sure that it's very much in keeping with our strategy.
For Huntington, you know, the growth we expect in loans this year is largely commercial led, and it's in 3 big places. In our Corporate and Specialty Banking division, where we've been building out, we've been investing to build capabilities. To see modest growth coming through is just what you would expect in terms of driving the return on those investments. Second place is our Asset and Equipment Finance business. You know, we've talked about this a number of times in other conferences. You know, when we brought the Huntington and TCF Asset and Equipment Finance businesses together, we built 1 of the strongest franchises in the country, and we are seeing that now play through in solid and sustained growth in that loan, you know, production, which is not surprising.
There's a long secular trend underway of businesses reinvesting in their property plant equipment to automate, supplant labor, supply challenges, drive efficiencies, which we'll really benefit from. Lastly, it's the line utilization that we're seeing in our Vehicle Finance Floor Plan business and our Distribution Finance business, which, you know, just the supply of goods coming out of manufacturers is incrementally improving as supply chain challenges wane. That's where we're seeing the growth come through.
you know, while we're on the topic of loan growth, you know, on Friday, you announced that Huntington added a new 10-person fund banking team to strengthen the sponsor business. Can you give us a brief overview of that and how that fits into your longer-term strategy?
Sure. We're really excited about this and so pleased to be able to welcome ten new colleagues to Huntington. So welcome team. This is a fund finance business that was most recently at Signature Bank, but before that at Bank of America and Wells Fargo. A great track record of performance over time. You know, and for us, it's not only You know, a sort of example of staying on our front foot, being opportunistic in this environment, leveraging our strength, now to capture opportunities, but also very much in keeping with our strategy of continuing to build out specialty disciplines and expertise verticals within our commercial banking business. So really excited about what this team can do. You know, the capital call lending business is one that comes with generally really good spreads.
very low historical, charge-offs and a great opportunity to build deposits and to drive treasury management revenues. Feel really good about where that business will be. We have a small business now in that area. This will enable us to expand it, I would expect over the moderate term for that business to get to be, you know, between 1%-2% of total Huntington loans over time. Contributory.
You would be opportunistic in hiring more teams if the opportunity was available?
Potentially.
All right.
Yeah.
Perfect. Maybe at, just digging into the fees side, I think you mentioned some pressure near term on fees, and, you know, maybe a little bit of a rebound in the back half of the year. Can you drill down into that a little bit, talk about your strategy there and talk about what should be driving that growth towards the back half of the year?
Yep. I think, you know, we've talked about fees a lot, we expect them to be, you know, around a fifth of the overall profit growth for the company over time. A critical part of the strategy, both financially, but also importantly, around deepening relationships and really wrapping our full arms around our clients and providing them all the services to make them, you know, sticky and loyal to the company, it's really a critical one. Three big areas, capital markets, payments, and wealth management.
You know, on capital markets, which has just been on an absolute tear, for the last five to seven quarters, we are seeing, you know, not surprisingly, given the environment, some lower activities, but continue to be, you know, pretty sanguine about where that will go over the coming quarters. I think we're beginning to see that now, strong pipelines in our Capstone business and solid underlying trends in our core capital markets business. That'll be a driver of sequential growth. I think payments continues to perform very well. We've got a top tier debit, a small but growing credit card business, and our treasury management activity continues to be very successful in penetrating new customers.
We'll see that contribute to growth. Then wealth management. You know, wealth is an area we've highlighted quite a bit. We're 1% penetrated in terms of our wealth offerings and our customers, you know, as of the end of last year. The typical regional bank is 3%-5% penetration. For us, just achieving the average level will represent more than a $100 million revenue opportunity, and it's really working. We're right sizing the kind of the go-to-market approach between our private bank and our financial advisors business. In the first quarter, you saw us make yet another announcement about that, bringing those two businesses together into the same unit to really continue to harmonize the go-to-market approach, which is really bearing fruit.
We're investing significantly in digital capabilities for clients to connect with their advisors. Ultimately, it's all driving toward assets under management growth, which for us, on a quarterly basis, continue to set new records internally in terms of net asset flows into assets under management. Those will be the things that really drive sequential growth from here, and continue to feel really good about where that fee business will go over the, not only the back half of this year, but in the longer term, as a really a powerful way to supplement return on capital.
These investments are baked into your expense guide for the year?
They are. So, you know, within our expense guide, as we've talked about, you know, a core underlying expense growth of around 1%-3%. You know, that's even as revenue is growing, you know, much faster than that. And for us, it's about, in expenses, it's about being very planful, anticipating, you know, what likely will be the revenue trajectory and taking actions to make sure that we're keeping overall expense growth at a low level, even as investments within that overall expense growth, investments in tech, in marketing, as I said, growing year-over-year in select new additions of personnel, that those are continuing to grow at a much faster rate to support the revenue trajectory over the moderate term.
Perfect. I want to drill into credit a little bit. You know, that's another topic that's been front and center for investors. At earnings, I think you highlight a lot of positive asset quality trends, you know, whether it's on the non-performing loan side, the criticized asset side. Can you talk about what you're seeing in 2Q and what the main areas of focus are?
Absolutely. Overall, credit continues to perform exceptionally well, really very, very strong. You know, we're operating with an extremely heightened degree of vigilance, not surprisingly, given the prospect of a recession on the horizon. For us, we are very focused on underwriting through a cycle, it allows us to not make substantive changes on our underwriting posture at times like this, but rather just to lean in and just go even deeper in terms of portfolio reviews. It's almost, you know, some kind of portfolio review happening virtually every week at this point. Every time we do that, what's coming back is more indications of the fundamental strength of the portfolio and of our clients. We feel really good about where that is.
The expectation for charge-offs this year is to normalize somewhat off of the extraordinarily low levels we saw last year, but to continue to be at the low end of our through the cycle range of 25-45 basis points of net charge-offs, and we continue to see that. You know, focus areas, you know, across the whole portfolio, so I wouldn't say we're, you know, differentially focused overly on any area, but clearly focused on CRE, on the small business portfolio, on areas like leverage lending, which for us are already a really small area. Again, portfolio generally looks really, really good.
I would tell you, as well, I feel great about the fact that our credit reserve of 1.9% is, you know, very sufficiently sized to deal with anything that might come up.
On the CRE side, you know, office is where most of the focus has been. I think you mentioned that office is less than 2% of your total loans, and most of it is in suburban areas. Can you talk about, you know, where you see the risk there and how you're tackling that?
Yeah. For us, CRE overall, including commercial REITs, it's about 14% of total loans. If you were to exclude commercial REITs, which are for the most part, the way the peer group reports is typically excluding commercial REITs, is 11% of total loans, which is at the lower end of the peer group in terms of overall size of CRE. As you noted, most of it is multifamily or industrial. The piece that's office is very small, less than 2% of total loans. Most of it's suburban, most of it is multi-tenanted. You know, for us, we're very focused on CRE overall.
Over the last 10 years, we've made a very concerted movement to the point where we have a much more concentrated portfolio in terms of really strong sponsors, deep experience in this space, strong relationships with us, and we feel like the sponsor backing is extraordinary. In office, you know, I think the thing that we're focused on is what are the lease expirations that was fundamentally going to drive revenue? Those are, you know, typically 5 to 7 to 8 to longer leases. We're not seeing any more than high single digits in terms of lease rolls over the next 5 years, which will allow time for properties to manage through.
Clearly, there'll be some issues, and we'll have to kind of address them as they come up. We've got a 3% credit reserve on overall CRE, 8% on office, and we think that those coupled with the strength of the underlying book, you know, leaves us in a really good place to have captured that loss content already.
All right. Perfect. I'm going to drill in a little bit on regulation and buybacks, and then quickly open to the audience if there's a question or two in the room. You know, on buybacks, I think you've been pretty clear that you want to get to the high end of your CET1 target. You know, how does the uncertainty on the regulatory environment feed into that?
You know, we think it's the right plan at this point to put buybacks on pause and continue to drive our capital up to the high end of the CET1 of our operating range toward 10%. This will be both organic capital build. We saw almost 20 basis points of capital build in Q1. I'd expect to see something similar again, really strong in Q2 and continuing into Q3 and Q4, but also husbanding back and really protecting the AOCI, which doesn't currently get reported in CET1, but clearly, it's in TCE. You know, we saw 7% of that AOCI come back just in the first quarter. If you look out through 2024, based on the forward yield curve, you'd see about 40% of it come back.
Those two things together will allow us to really increase capital. You know, it's quite likely that there will be a change in the way that AOCI works in terms of CET1 reporting. You saw us in our prepared remarks illustrate what our CET1 would be on an adjusted basis, 7.9%, one of the highest in the peer group. You know, that's certainly part of the thinking to continue to drive CET1 higher and manage for what will likely come down the pike in terms of that. So we think it's the right plan and we'll continue to execute on that.
Is there anything you need to see in terms of either the macro environment or clarity on regulation before you restart those buybacks?
Yes and yes.
Okay.
you know, I think throughout the course of this year, I think we've got the plan generally set. you know, over the next few months, we'll presumably get more clarity on the regulatory outcomes of Basel III, of resolution planning and how AOCI will be treated. We'll also, hopefully, by the end of this year, have much greater clarity on where the economy is heading. we'll go into 2024 and set a new capital plan at that point.
Does that impact how you manage your balance sheet as well on the asset side?
You know, I think, over time, I suspect we will continue to evolve as we have been, which is to really, continue to drive the highest return loan categories and optimize the balance sheet, make the balance sheet work even harder in the securities portfolio, continue to gradually shorten duration. No substantive changes or major repositioning plan, but just an evolution of where incremental investments are going, I think, is the strategy.
Got it. Are there any questions in the room? Over there.
Thank you. You mentioned having strong sponsors on CRE.
Yeah.
I think, well, sponsors that would have been considered strong a year ago, PIMCO and Brookfield, are tossing keys like crazy. What, because it's to their economic advantage to do so. What makes a strong sponsor?
Yeah, it's a great question, and I don't disagree with your, with your points. You know, I think for us, it's about what we've seen them do in previous challenging environments and in previously challenging situations. We've seen our sponsors stay committed to their properties and stay committed to their investments. It's also the breadth of our relationship with them, which matters. I think, you know, we matter to them, and they, I think, you know, take that position with a lot of care and diligence. We'll see.
I don't disagree with your point, writ large. You know, for us, as we deep dive into that book, continue to see not only strength of the properties, but also feel good about the underlying support as well.
All right. We'll, we'll end it there. Zach, thanks so much for your time.
Thank you. Have a great day, everybody.